After a buying spree on Tuesday in the Dhaka and Chattogram bourses, most of the quick high gain stocks - especially those from the banking sector – went into profit booking on Wednesday.
According to analysts, increased caution among investors because of the sudden heating up of the call money market and the central bank's show-cause notice to Sonali Bank for its excessive capital market exposure, offset the increased enthusiasm of the capital market regulator's recent moves to attract stock buyers.
However, investors on Wednesday opted to buy some of the recently oversold stocks, including those from the insurance, tannery, IT, food, and cement sectors.
Finally, the DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), closed at 7,061 points, only 4.2 points higher from the previous trading session.
On the other hand, the DS30, the blue-chip index, lost 0.3% to close at 2,683.
"Profit-booking in the giant banking sector reversed yesterday's upward momentum," said EBL Securities.
Investors also showed interest in insurance stocks ahead of the year-end declaration.
However, amidst the volatility, investors were active on both sides of the trading fence. Cautious investors are booking profits on fast gaining stocks while bargain hunters are showing interest in buying sector-specific stocks, said EBL Securities in its daily market commentary.
Trading turnover in the DSE increased 1.02% and stood at Tk1,507 crore amid an increased participation of investors.
The call money rate shot to a 14 month-high of 3.14% on average on Monday, up from 2.27% a week ago.
Due to rising commodity bills, businesses are in need of more money nowadays, while families also need more cash to pay for their daily needs amid the higher inflation, said a market analyst at a brokerage firm alongside explaining their interbank overnight borrowing trend and the interest rate.
A senior stockbroker told The Business Standard, the capital market regulator encouraged investors to buy undervalued stocks by relaxing its margin loan rules on Monday, alongside its Tuesday approval of three more mutual funds in the market, and also its approval of the capital market stabilisation fund's plan to lend Tk100 crore to the Investment Corporation of Bangladesh (ICB) for stock investments.
Investors literally got an opposite message from the central bank on Wednesday when it asked state-owned Sonali Bank Ltd with a show cause, as to why it surpassed its capital market exposure limit by lending Tk500 crore to the ICB recently, he added.
"Investors get really nervous when they hear of any conservative move by the Bangladesh Bank regarding the capital markets, especially when it appears to be a countermove against any moves made by the Bangladesh Securities and Exchange Commission that seem to grow and prop up the market," the stockbroker said, seeking anonymity.
However, in the DSE, of the 366 issues traded, 152 advanced, 177 declined, and 37 remained unchanged on Wednesday.
Also, in the Chittagong Stock Exchange, the broad index was slightly up, while indices for selective stocks ended in the red, reflecting short-term profit booking in large cap stocks and advances in comparatively smaller cap stocks which have less impact on the broad-based indices.